Key index levels: technicals for FTSE, DAX and Dow

To say the markets are rangebound is perhaps something of a cop-out, but clearly participants are awaiting some additional information in order to decide the next direction to take from here.

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anonymous

2014-05-30T10:22:00+0100

The US gross domestic product number yesterday barely made a dent in sentiment, and given its historical data it’s not all that surprising. The non-farm payrolls next week will as usual be of importance, but I would think that a poor number here in conjunction with the weak growth in Q1 will add up to some volatility.

Chinese manufacturing purchasing managers’ index, expected early on Monday, will likely decide the fate of the FTSE, in particular the mining contingent. Next Thursday will also see the European Central Bank closely watched for any stimulus. Should Mario Draghi satisfy the somewhat elevated expectations, we may see equities take a leg higher from present levels. We could even start to see some much needed trade volume.

6830 still key support for FTSE

The same range applies to the FTSE as before. Having failed to break the 6885 level yesterday, the 6830 level remains an important support. On the downside, the 6770-5 level possesses even more importance now, as a break and daily close below it would confirm a potential double top reversal and culminate in a measured move back towards the 200-day moving average at 6677.

The negative divergence on the daily relative strength index tends to support the range bound to downside at this juncture.

A break through the highs (6896) seen on 15 May would be the necessary action needed if those 6930 highs from 1999 are to be attained.

The trendline support from 23 May is currently being tested and price action is below the 50-hour moving average. The short-term relative strength index suggests we could see additional momentum to the downside where the 200-hour MA will likely save the day, coming in coincidentally at 6831.

DAX targets 9970

The Germany 30, overbought on the daily chart, will also need to break its recent high of 9970 if the 10,000 is to become more than a pipedream. The 9900 support has been holding firm and the trend remains up even if we are seeing some bearish divergence on the four-hour chart. Any break down of the 9900 support takes us back to 9870, with the 200-hour MA providing a buffer at 9808.

Dow finds support at 16,620

The Dow Jones didn’t quite make it through the 16,700 level yesterday, but the 16,620 level is acting as a decent support at this point. A break-down of this would see us head back towards 16,580 (200-hour MA). The 16,515 level is the next area where bids have manifested themselves in the past.

A move through 16,709 targets the recent all-time highs and would make the 16,800 level a credible target too, as markets do tend to break from a range in a measured move.

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